Harman, buy-to-let and the Blair Witch Project

I’m weary of the nanny state and the politically correct. Night after day we are lectured and brainwashed on what we shouldn’t eat and drink and how much exercise we should take and now, God forbid, we have Harriet Harman’s Equality Bill

This is about to be debated in the House of Lords and if enacted will impose on public bodies a new ‘socio-economic duty’ to reduce inequality.

I suppose I should be excited but I’m scared because when politicians talk of equality I inevitably think of Animal Farm – hence the title of this piece. Blair is Eric Blair, better known as George Orwell, and the Witch is whoever you want her to be. Buy-to-let I’ll come to later.

During the idealistic first days of the animal revolution all animals, if you remember Orwell’s story, are declared equal but as the pigs consolidate their political leadership, and get all the best food and move into the farmhouse, the political slogan changes – all animals are still equal but some animals are more equal than others.

Of course in the real world of Broken Britannia, the situation is different – those who feed at the trough in Whitehall and Westminster don’t share a farmhouse but thanks to parliamentary expenses may own several houses, some with moats and tennis courts. Indeed, the system has been so generous and open to abuse that many MPs have built up whole portfolios of houses to rent.

Naturally the rest of us don’t share a barn like common farm animals but for the 1.6 million 18-34 year olds going back to live with their parents last year (up by 500,000 from the previous year) and for a further 300,000 people aged 35 to 54 living in similar circumstances, it can’t feel that much different.

Whether some of them might qualify for social housing is open to debate but even if they do, with around two million households (about five million people) on the social housing waiting list, the chances of them ever setting up on their own look slim, especially at the current rate of house building.

At one time there were hopes that the private rental sector (PRS), representing around 14% of all households and about three million homes, might fill the gap but the credit crunch hit the buy-to-let mortgage providers hard and the few left in the market were given a tough time by the Financial Services Authority.

Besides, despite the one-time popularity of buy-to-let, the Rugg Review of 2008 found no evidence it had brought much new housing stock to the PRS, except possibly in the provision of student accommodation.

That said, the government now wants to address this anomaly and has published a consultation document on the role that the PRS could play in increasing supply in the housing market.

To that end it cites examples of how other European governments have provided strong investment incentives, often geared towards new build buy-to-let. For instance, since 1984 a number of French schemes have allowed private landlords investing in new build stock to offset a proportion of their investment cost against future income, reducing their tax liability.

Similarly, Germany has provided generous depreciation allowances for newly constructed rental properties, though as the consultation document points out, these might be incompatible with EU law.

The government acknowledges the different roles of small and large landlords and expresses an expectation that the supply of mortgage finance for buy-to-let should recover over time though, it adds, “this does not necessarily mean that individuals will have the same appetite for PRS investment as in the past”.

It is therefore interested in the role that institutional investors could play in the expansion of the PRS. In short, and to complete the circle, the document doesn’t dwell on vague aspirations like theEquality Bill but by focusing on the narrow and practical it may well help in the long term to create equality in the tenure options open to those outside of politics and currently excluded from having a home they can call their own.

The Money Centre is planning to relaunch in April and offer a range of financial services for landlords. Lloyds Banking Group stopped accepting mortgage applications from TMC last December and the brokerage was forced to make its staff redundant. Instead of offering buy-to-let broking TMC will offer financial advice, estate planning, finance and insurance broking, […]

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George Orwell must be reaching ‘top spin’ revolutions in his grave as both Animal Farm and 1984 turn into today’s reality in so many ways.
What is so depressing is the large numbers of us who, having realised that the word ‘consultation’ has absolutely no meaning with this Government (take any piece of legislation from NERC to HIPs), have simply given up protesting.
All the more vital then that your small voice of reason is still sounding Mr Murray. Please keep it up!
Christopher